Walking candidates through equity compensation with a model [template included]
As more venture funding flows into the tech startup ecosystem, the market for talent has only gotten more competitive. Given the tight labor market, startups need to tap every lever they can to stand out to candidates. One severely underinvested area of the candidate experience is talking through equity compensation. Specifically the relevant terms and tax implications, as well as how to model the value of their ownership at different exit values.
One simple resource we built at firsthand was an equity compensation model (generic version available here) that we send to candidates so that they can model what the value of their ownership would look like at different cash and equity amounts, dilution from subsequent fundraises, and exit values.
This is valuable for a few reasons:
- It shows that we value an ownership mindset and want to incentivize our employees to think about the long term impact to the individuals we serve and our customers as mechanisms to increase shareholder value.
- It allows us to compete with later stage companies by explicitly showing the upside potential of the business while talking through items that candidates may not have been considering: being able to afford exercise prices due to a low cost basis, having time to hold for long term cap gains treatment, tax advantages, etc.
- It’s just the right thing to do. For too long startup employees have been the lowest on the preference stack both literally and figuratively, even though they are just as much the life blood of the ecosystem as founders and investors.
In general, I highly recommend spending more time with candidates on equity, and being comfortable with transparency (e.g., ownership amount, expecting fundraising till exit) as a unique talent acquisition lever. And if you’re interested in supporting individuals on Medicaid living with serious mental illnesses, feel free to reach out to see if there’s a fit at firsthand!
Dhruv Vasishtha is VP Product and Technology at firsthand, a venture backed tech enabled services startup attempting to dramatically change the lives of those who have fallen through the gaps in our safety net due to the complexity of their serious mental illness. You can find him on Twitter @dvasishtha.
